BroadSoft Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of IP-based communications specialist BroadSoft (NAS: BSFT) did a fine impression of a dropped call today by falling as much as 11.7% on very heavy trading.

So what: The company beat earnings and revenue estimates in the just-reported third quarter, and by quite the margin too. Moreover, next-period guidance points to another quarter of strong sales. Impressive as it was, the report still wasn't strong enough to support a stock that had gained 53% over the last three months.

Now what: Networking gear makers have disappointed time and again this earnings season in a building Greek chorus (pun intended) of weak service-provider spending. That gloomy choir includes voices very close to BroadSoft's timbre, such as direct competitors Cisco Systems (NAS: CSCO) and Sonus Networks (NAS: SONS) . But BroadSoft breaks that trend; CFO Jim Tholen says that the strong results "were driven by broad-based demand from our service provider customers." Granted, the company makes big chunks of business abroad, but Verizon (NYS: VZ) is typically its largest customer. Look past the disappointed momentum, traders, and you'll see signs of a recovering sector in this report.